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News + Insights

What can a Tree Ring tell us about the Paradoxes of Investing?

08-31-2017 Insights by David Basten

Are your clients judging long-term investments with an eye toward short-term performance?

Are they making it difficult for you to manage their investments to achieve long-term objectives that are both feasible and worthwhile?

Yorktown Funds can help you address these questions. We can help you inform your clients about the importance of a long-term investment perspective and strategic diversification. This in turn will help you work with them to establish realistic long term goals, while managing their short term expectations.

Long-Term Owners Mind Set?

Our job is to live in the future, informed by the past and present. We monitor long-term trends that take place across many years and multiple business cycles, such as demographics, technology, health and energy.

We believe the market, while irrational and random in the short term, is rational in the long term. We employ a disciplined process informed by a long-term business owner mindset. We invest alongside our clients and believe that success overs the long haul requires effort, flexibility, intuition and discipline.

The Callan Table of Periodic Investment Returns

I have always found these Callan Charts to be a great illustration of the power of a commitment to long term investing. As you will see, every asset class has enjoyed periods of outstanding performance. Our challenge is having the patience to stay with them through difficult times to benefit from those peak periods.

The Periodic Table of Investment Returns depicts annual returns for various asset classes, ranked from best to worst.

Each asset class is color-coded for easy tracking. Well known, industry standard market indices are used as proxies for each asset class.

The table was first authored by Callan Capital Markets and Alternatives Research in 1999.

The Callan Table that No One Sees
Annual Returns for Key Indices Ranked in Order of Performance (2007-2016) – Relative to Zero

In 2007 one out of ten returns for key indices failed to beat cash. In 2008–the worst year in the history of modern investing—eight out of ten failed to beat cash but recovered more than the loss over the next six years.

There is no guarantee that any investing strategy will succeed. Diversification does not ensure a profit or guarantee against loss. Investing involves risk, including loss of principal. Small cap and mid cap investing involve greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat. Investments in international markets present special risks including currency fluctuation, the potential for diplomatic and political instability, regulator and liquidity risks, foreign taxation and differences in auditing and other financial standards. Risks of foreign investing are generally intensified for investments in emerging markets.

Insights by David D. Basten

Your clients may bring you a sapling that bends in the wind, but with your guidance and thoughtful application of these time-tested principles, you will help them grow it to a mighty oak.

Next month we will take a look at diversification and structure. One of the key benefits of a long term investment perspective is that it allows you to effectively implement a winning investment strategy. But, as we will discuss next month, no strategy can work, even over time, if it is inhibited by a faulty structure. Stop back and learn more about the structural foundation that we believe sets Yorktown Funds apart from the rest.

I hope you enjoyed this piece and that you will feel free to call me directly at 434-941-2303 if you have any questions or just want to talk about investing.

David Dillard Basten
President & CIO
Yorktown Funds